In a statement to Parliament on 12 December:
“With permission, Mr Speaker, I would like to make a statement on last week’s European Council.
I went to Brussels with one objective: to protect Britain’s national interest.
And that is what I did.
Let me refer back to what I said to this House last Wednesday.
I made it clear that if the Eurozone countries wanted a treaty involving all 27 Members of the European Union we would insist on some safeguards for Britain to protect our own national interests.
Some thought what I was asking for was relatively modest.
Nevertheless, satisfactory safeguards were not forthcoming and so I didn’t agree to the Treaty.
Mr Speaker, let me be clear about exactly what happened, what it means for Britain what I see happening next.
Mr Speaker, let me take the House through the events of last week.
At this Council, the Eurozone economies agreed that there should be much tighter fiscal discipline in the Eurozone as part of restoring market confidence.
Mr Speaker, that is something Britain recognises is necessary in a single currency.
We want the Eurozone to sort out its problems.
This is in Britain’s national interest because the crisis in the Eurozone is having a chilling effect on Britain’s economy too.
So the question at the Council was not whether there should be greater fiscal discipline in the Eurozone, but rather how it should be achieved.
There were two possible outcomes.
Either a treaty of all 27 countries with proper safeguards for Britain.
Or a separate treaty in which Eurozone countries and others would pool their sovereignty on an intergovernmental basis…
…with Britain maintaining its position in the Single Market, and in the European Union of 27 members.
We went seeking a deal at 27 and I responded to the German and French proposal for Treaty change in good faith, genuinely looking to reach an agreement at the level of the whole European Union, with the necessary safeguards for Britain.
Those safeguards - on the single market and on financial services - were modest, reasonable and relevant.
We were not trying to create an unfair advantage for Britain.
London is the leading centre for financial services in the world. And this sector employs 100,000 in Birmingham, and a further 150,000 in Scotland.
It supports the rest of the economy in Britain and more widely in Europe.
We were not asking for a UK opt-out, special exemption or generalised emergency brake on financial services legislation.
They were safeguards sought for the EU as a whole.
We were simply asking for a level playing field for open competition for financial services companies in all EU countries…
…with arrangements that would enable every EU Member State to regulate its financial sector properly.
To those who say we were trying to go soft on the banks, nothing can be further from the truth.
We have said that we are going to respond positively to the tough measures set out in the Vickers report.
There are issues about whether this can be done under current European regulations.
So one of the things we wanted was to make sure we could go further than European rules in regulating the banks.
The Financial Services Authority report on RBS today demonstrates how necessary that is. We have problems in this country that this government inherited and needs to sort out.
And those who say that this proposed Treaty change was all about safeguarding the Eurozone - and so Britain shouldn’t have tried to interfere or to insist on safeguards - are also fundamentally wrong.
The EU Treaty is the Treaty of those outside the Euro as much as those inside.
Creating a new Eurozone treaty within the existing EU treaty without proper safeguards would have changed the EU profoundly for us too.
It’s not just that it would have meant a whole new bureaucracy, with rules and competences for the Eurozone countries being incorporated directly into the EU Treaty…
…it would have changed the nature of the EU - strengthening the Eurozone without balancing measures to strengthen the Single Market.
Of course an intergovernmental arrangement is not without risks but we did not want to see that imbalance hard-wired into the Treaty.
And to those who believe this wasn’t a real risk, France and Germany said in their letter last week that the Eurozone should work on single market issues like financial regulation and competitiveness.
That is why we required safeguards and I make no apologies for it.
Of course I wish those safeguards had been accepted.
But frankly I have to tell the House the choice was a treaty without proper safeguards or no treaty.
And the right answer was no treaty.
It was not an easy thing to do but it was the right thing to do.
As a result, Eurozone countries and others are now making separate arrangements for co-ordinating their budgets and making sure there is more surveillance of what they do and the fiscal integration they need to solve the problems in the Eurozone.
They recognise this approach will be less attractive, more complex and more difficult to enforce and they would prefer to incorporate the new treaty into the EU Treaties in the future.
Our position remains the same.
What this means for Britain
Let me turn to what this means for Britain.
Mr Speaker, Britain remains a full member of the European Union.
And the events of the last week do nothing to change that.
Our membership of the EU is vital to our national interest.
We are a trading nation and we need the single market for trade, investment and jobs.
The EU makes Britain a gateway to the largest single market in the world for investors. It secures more than half of our exports and millions of British jobs.
And membership of the EU strengthens our ability to progress our foreign policy objectives too…
…giving us a strong voice on the global stage in issues such as trade, and as we have seen in Durban this weekend, climate change,
So we are in the European Union and we want to be.
This week there will be meetings on the councils on Transport, Telecommunications and Energy, and Agriculture and Fisheries.
Britain will be there as a full member at each one.
But I believe in an EU with the flexibility of a network, not the rigidity of a bloc.
We’re not in the Schengen no borders agreement and neither should we be…
…because it is right that we should use our natural geographical advantage as an island to protect us against illegal immigration, guns and drugs.
We’re not in the Single Currency and while I am Prime Minister we will never join.
We are not in the new Euro area bailout funds, even though we had to negotiate our way out it.
And we are not in this year’s Euro-Plus pact.
When the Euro was created, the previous government agreed there would need to be separate meetings of Eurozone Ministers.
It is hardly surprising that those countries required by Treaty to join the Euro chose to join the existing Eurozone members in developing future arrangements for the Eurozone.
Those countries are going to be negotiating a treaty that passes unprecedented powers from their nation states to Brussels.
Some will have budgets effectively checked and re-written by the European Commission.
None of this will happen in Britain.
But just as we wanted safeguards for Britain’s interests if we changed the EU treaty, so we will continue to be vigilant in protecting our national interests.
An intergovernmental treaty, whilst it doesn’t carry with it the same dangers for Britain, nonetheless is not without risks.
The decision of the new Eurozone-led arrangement is a discussion that is just beginning.
We want the new Treaty to work in stabilising the Euro and putting it on a firm foundation.
And I understand why they would want to use the institutions.
But this is new territory and does raise important issues which we will need to explore with the Euro plus countries.
So in the months to come we will be vigorously engaged in the debate about how institutions built for 27 should continue to operate fairly for all member states, and in particular for Britain.
The UK is very supportive of the role the institutions - and the commission in particular - play in safeguarding the Single Market.
So we will look constructively at any proposals with an open mind.
But let’s be clear about one thing: if Britain had agreed Treaty change without safeguards, there would be no discussion.
Britain would have no protection.
Mr Speaker, let me turn to the next steps.
The most pressing need is to fix the problems of the Euro.
As I have said, that involves far more than simply greater medium term fiscal integration, important though that is.
Above all the Eurozone needs to focus at the very least on implementing its October agreement.
The markets want to be assured that the Eurozone firewall is big enough, that Europe’s banks are being adequately recapitalised and that the problems in countries like Greece have been properly dealt with.
There was some progress at the Council.
The Eurozone countries noted the possibility of additional IMF assistance.
Our position on IMF resources remains the one I set out at the Cannes G20 summit.
Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world.
But IMF resources are for countries not currencies, and can’t be used specifically to support the Euro.
There also needs to be greater competitiveness between the countries of the Eurozone.
But let’s be frank - the whole of Europe needs to become more competitive.
That is the way to more jobs and growth.
Many Eurozone countries have substantial trade deficits as well as budget deficits.
If they are not to be reliant on massive transfers of capital they need to become more competitive and trade out of those deficits.
The British agenda has always been about improving Europe’s competitiveness.
And at recent councils we have achieved substantial progress on completing the single market in services, opening up our energy markets and exempting microbusinesses from future regulations.
This has been done by working in partnership with a combination of countries that are in the Eurozone and outside it.
We will continue to work with like-minded countries to push forward this agenda.
Those countries such as Holland, Sweden and Germany want these issues discussed as a full 27 - as they will be - because they want our support in the debate against some other members who don’t share these views.
Similarly on this year’s EU budget it was Britain in partnership with France, Germany and Holland amongst others that successfully insisted on no real increase in resources - for the first time in many years.
On defence, Britain is an absolutely key European player whether leading the NATO Rapid Reaction Force…
…or tackling piracy in the Indian Ocean.
And our partnership with France was crucial in taking action in Libya.
Britain will continue to form alliances on the things we want to get done.
We’ve always had a leading role in advocating the policy of enlargement.
And at this council, we all celebrated the signing of Croatia’s accession Treaty.
That’s one European Treaty I was happy to sign.
Mr Speaker, let me conclude with this point.
I do not believe there is a binary choice for Britain: that we can either sacrifice the national interest on issue after issue…
….or lose our influence at the heart of Europe’s decision-making processes.
I am absolutely clear that it is possible both to be a full, committed and influential member of the European Union…
…and to stay out of arrangements where we can not protect our interests.
That is what I have done at this Council.
That is what I will continue to do as long as I am Prime Minister
It is the right course for this country.
And I commend this statement to the House.”